Social Responsibility

Corporate South Africa should invest in avoiding a revolution

It has become extremely urgent for corporate South Africa to get involved in social responsibility programmes if a violent and destructive revolution is to be avoided.

While the future of President Jacob Zuma in the shadow of the unfolding drama about ‘state capture’ by the Gupta family and the fallout of Nkandlagate dominates public attention and media reporting, the real danger to South Africa’s future stability lies elsewhere.

It lies in the fact that millions of children from poor families go to bed hungry most days of the week, that in the face of already mounting violent protests throughout the country a coalition of civic organisations are mounting a “week of outrage” protesting against extremely high levels of poverty and unemployment and strongly climbing food prices due to the drought and weakening rand.

We have no doubt that there is a revolution brewing in South Africa while, as we point out in another article, the South African Communist Party has been involved in an already well developed operation of ‘state capture’ of their own.

This happens as a massive ideological battle is raging about whether the solution to South Africa lies in a pure ‘free market economy’ or full-blooded socialism – both are equally dangerous in our estimation.

To our mind the solution lies in finding the most appropriate mixed economic model for South African conditions.

Examples from history

And there are historical examples in our country of special programs that managed to turn the fate of communities around.

In 1952 my own family arrived as ‘poor whites’ in Vanderbijlpark when my father was employed by the state corporation Iscor. For the first time ever we lived in a formal brick-and-mortar house. The rent was subsidised and a few years later my father could buy the house as we emerged from absolute poverty.

When I entered primary school in 1953 I also became the beneficiary of a school feeding system that included at least one fruit a day.

When in the 1980s sanctions became a serious threat to the South African economy, a campaign known as Buy back the Farm was launched with state assistance measures.

More importantly, under the so-called Sullivan Code launched in the US, foreign investors could earn points allowing them to stay in the South African market by creating/setting aside “social responsibility” funds. The aim was to uplift members of the black community by, among other things, management development programmes,

Not only did some of the beneficiaries of these programmes in the 1990s become key players at the political settlement negotiations, but some of today’s prominent black businessmen made their start from that platform. One could almost call it Black Economic Empowerment (BEE) Model I – the difference with the present model being that it was business- and not state-driven.

What are the costs?

If one argues that it is in the interest of corporate South Africa to invest in the social stability in the country, it is a legitimate question to ask: What will it cost?

Looking at one of the most basic challenges, eliminating hunger among the school children of the poor as an example, it does not look all that daunting.

According to Joint Aid Management (JAM) South Africa’s MD, David Brown, at least two million pre-school children go to bed hungry every night in South Africa. JAM is feeding more than 84 000 of these children across seven provinces, by providing them with a bowl of porridge each day known as CSS+, or Corn Soya Sugar Blend. This contains 75% of their daily nutrient requirements, says Brown.

Through JAM’s feeding scheme, it costs R360 to feed a child for a year. Assuming that 1 916 000 children still need to be fed, that amounts to R689.8 million per year, or 0.19% of the R354.4 billion collectively earned in 2015 (calculated by adding headline earnings or operating profit, where headline earnings were’t available) by the JSE’s ten largest companies by market capitalisation.

It would cost these companies roughly 2% of one year of profits to feed these children for ten years.

Granted, five of the ten companies earn income in foreign currencies, which greatly inflates their earnings when converting them to rand.

Put differently then, South Africa’s Big Four banking groups (Barclays Africa, FirstRand, Nedbank and Standard Bank), which all report earnings in rand, would have to cough up 0.92% of 2015 profits (cumulatively R75 billion) to feed the same number of children for a year.

In other words, the problem is solvable regardless of how you look at it.

CSI must be driven from the top

According to Brown, when it comes to corporate social investment (CSI) in South Africa, programmes driven by senior executives have the greatest impact. “Some chief executives will make sure that they attend CSI days with their staff, for example, improving a crèche,” he notes.

Some organisations leverage their giving by inviting their customers to contribute, Brown explains. For example, motor oils company Liqui Moly contributes R10 from the sale of every product in South Africa to feeding and educating children.

KFC, meanwhile, invites customers to add R2 to their meal purchase, which is then contributed to various beneficiaries – including school feeding programmes and childhood development organisations – through the fast food chain’s Add Hope initiative.

“One company in the IT sector has elected to feed an additional two children for every one child fed by one of their employees,” notes Brown.

“For companies to really manage CSI properly they need to do due diligence on the NGO or organisation to which they are donating funds,” Brown adds. “Many organisations are not being good stewards of their CSI and investing in reliable NGOs,” he says.

Broad-based black economic empowerment scorecards (B-BBEE) have contributed to helping organisations think more broadly about CSI, Brown continues, in that companies now consider skills and enterprise development as part of their CSI strategy, as opposed to donating funds only.

110 tonnes of food every day

With roots in emergency response services, JAM International has origins dating back more than 30 years to the Mozambican civil war. Founded in 1984 by husband and wife team, Peter and Ann Pretorius, JAM International now operates in Mozambique, Angola, South Sudan, Rwanda and South Africa.

In South Africa, JAM focuses on early childhood development (ECD) and has partnered with more than 1 700 ECD centres where it feeds more than 84 000 children, improves infrastructure and provides teacher training to caregivers.

“Worldwide research indicates that an investment in ECD gives a far greater return than an investment at any other stage of education,” Brown says. “Hungry children cannot learn. More than a quarter of children under nine years old in South Africa suffer stunted growth because they have not had sufficient nutrition to enable proper brain and physical development,” Brown tells Moneyweb.

In the rest of Africa, JAM is moving 110 tonnes of food, or 33 truckloads, every day and are feeding 1.1 million individuals.

It hopes to be active in all nine provinces by the end of the year and to be feeding 100 000 children, Brown says.